THRISSUR:ESAF Small Finance Bank returned to profitability in the first quarter of FY27, reporting a net profit of Rs80.08 crore against a net loss of Rs81.22 crore in the year-ago quarter.
The Thrissur-based lender strengthened asset quality and accelerated its shift towards secured lending. The bank appears to be emerging from a challenging phase, reporting a sharp turnaround in the first quarter of FY27.
The turnaround was supported by strong operating performance, improvement in margins and a substantial decline in credit costs.
Total operating income increased 33 per cent year-on-year to Rs1,097.77 crore from Rs828.23 crore, while pre-provision operating profit (PPOP) surged 179 per cent to Rs349 crore.
The bank's transformation is visible in the changing composition of its loan book. While ESAF built its franchise initially around microfinance lending, it has been steadily increasing its focus on secured and diversified lending products.
Secured advances
Secured advances grew 35 per cent year-on-year to Rs14,465 crore and now account for 62 per cent of gross advances, compared with 59 per cent a year ago. The secured portfolio includes segments such as MSME, agriculture, retail loans and gold loans.
At the same time, unsecured advances, largely representing microfinance-linked lending, grew at a slower pace of 16 per cent to Rs8,751 crore.
This portfolio rebalancing appears to have helped ESAF contain asset quality pressures. Gross non-performing assets (GNPA) improved to 5.4 per cent as of June 2026 from 7.5 per cent a year ago, while net NPA declined sharply to 0.8 per cent from 3.8 per cent.
Provision coverage ratio (PCR) improved to 85.5 per cent from 73.2 per cent, providing greater protection against future credit shocks. Slippages during the quarter were 84 per cent lower compared with the year-ago period and 29 per cent lower sequentially.
Net interest margin
The improvement in profitability was also aided by better margins. Net interest margin (NIM) expanded to 7.9 per cent from 6 per cent a year ago, while cost-to-income ratio improved to 58.1 per cent from 78.2 per cent.
Business growth remained healthy, with total business crossing the Rs50,000-crore milestone. Gross advances grew 27 per cent year-on-year to Rs23,216 crore, while deposits increased 19 per cent to Rs26,924 crore.
The bank has also maintained a comfortable liquidity and capital position, with capital adequacy ratio (CAR) at 23.9 per cent, net worth at Rs1,864 crore and liquidity coverage ratio (LCR) at 133.3 per cent.
Managing Director and CEO Dr K Paul Thomas attributed the performance to the bank's strategy of building a diversified and secured portfolio while continuing to focus on financial inclusion.
"Our strategy of building a diversified, secured and customer-centric portfolio is delivering encouraging results for growth, profitability and asset quality," he said.
